The rupee fell below the 61 per USD mark on Friday. It hit 60.92/USD, its highest in more than two months on the back of broad losses in the greenback versus major currencies.
Falling to nearly nine-month lows, the rupee today closed just shy of 56-level against the dollar after it slumped by 39 paise to end at 55.96, weighed down by month-end demand for the US currency from importers and defence-related purchases.
CNBC TV18's Menaka explores the burning issue of currency war as central banks start to directly intervene in money markets to stabilise their respective currency. Joining her is Andrew Busch, Global Currency and Public Policy Strategist at BMO Capital Market.
The rupee kick started the month on a strong note, rising early on Monday tracking regional units, local shares and with month-end hefty dollar demand out of the way.
The rupee strengthened in morning trade on Wednesday aided by local share gains and the dollar's fall against major currencies, but high oil prices are seen limiting the rise.
The rupee should rise on Friday, taking cues from overnight gains in the euro and expectations the dollar will weaken in the weeks ahead.
Asian stocks rose on Monday as the US job market showed further signs of recovery, highlighting a brighter outlook for its economy, while the dollar held firm against a basket of other major currencies.
The rupee should strengthen to fresh one-week highs on Wednesday, taking cues from the dollar's drop against major currencies.
The rupee dropped to its lowest level in more than a week on Wednesday as the dollar climbed broadly against major currencies and Asian peers, while a shaky shares added to the downbeat mood.
The rupee extended its fall in afternoon session on Tuesday tracking the dollar's sharp gains versus major currencies and some demand from foreign banks and also dollar buying for defence-related payments.
The rupee is expected to start 2011 on a stronger note tracking gains in other regional peers and firm sharemarkets, but the dollar's firmness versus major currencies is seen limiting a sharp rise.